Unintended Incentives
It’s easy to design policy mechanisms which create incentives for the wrong sorts of behaviour, it seems. The Economist today reports on the incentives which the Kyoto Protocol has created for factories to produce MORE greenhouse gases other than carbon dioxide:
“Even after accounting for their potency, HFCs make up less than 1% of global greenhouse gas emissions; and the refrigerant that gives rise to HFC-23 is already slated for elimination by the Montreal protocol. But in the meantime, there is evidence that factories are ramping up production of HFC-22 in order to boost emissions of HFC-23, so that they can make windfall profits from cutting back on HFC-23 later and selling the emission-reduction credits, says Michael Wara of Stanford University. They can hope to earn twice as much from selling their credits as they can from selling their refrigerants.”